This Exclusive Firm Now Sells ETFs Directly to Investors

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A well-respected mutual fund company is allowing average investors to access its funds for the first time without the help of a financial adviser.

Dimensional Fund Advisors — more commonly known as “DFA” — has unveiled its first line of exchange-traded funds, or ETFs. That means individual investors can now buy directly into DFA’s services.

In the past, the only way most investors could access DFA funds was to hire a financial professional who had been approved to sell the funds. Now, investors can buy the company’s ETFs through a brokerage — without paying a commission at many brokerages, as Morningstar has pointed out.

The allure of DFA

Among investment pros, DFA has something of a cult following. In 2011, The New York Times described the privately held company as “drawing such passionate fans that people frequently refer to it as a religion.”

DFA is often compared to Vanguard Investments, but there are some key differences between the two firms. As the NYT has noted:

“Vanguard index funds carefully track commercial indexes like the S.& P. 500. D.F.A. tries to capture the returns of the same asset classes. But because it doesn’t promise to slavishly follow a particular index, it doesn’t have to own precisely the same securities (or the same number of securities) in those indexes at the same times.”

In many years over its history, DFA’s funds have outperformed the indexes, according to the NYT.

DFA’s new ETF lineup

Thus far, DFA has rolled out three exchange-traded funds:

  • Dimensional US Core Equity Market ETF (DFAU), which Morningstar recently cited as one of the best new ETFs of 2020
  • Dimensional International Core Equity Market ETF (DFAI)
  • Dimensional Emerging Core Equity Market ETF (DFAE)

Six more Dimensional Fund ETFs will come onto the market during the first half of 2021.

Unlike many ETFs, Dimensional Fund ETFs are not expected to passively track an index. According to Money:

“ETFs that simply track indexes are a dime a dozen, but with an active model, DFA could tilt its products towards elements it identifies as generating superior long-term returns: Factors like attractive valuation and high profitability.”

Should you buy DFA’s ETFs?

While DFA has a solid reputation and loyal customers, it is worth noting that several studies have shown that buying standard index funds and keeping your investing expenses low typically offers the best odds of achieving long-term gains.

Although many DFA funds have a history of beating comparable index funds, past performance is no guarantee of future success. Indeed, in recent years, the value investing style that DFA typically emphasizes has actually underperformed the returns of growth stocks, as Money notes.

Still unsure of what to do? Here are a couple of resources that can help you uncover the best investing strategy for your needs:

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